Selling your house with Spray Foam in the loft, Japanese knotweed in the garden or worried about selling your apartment that’s in a building with safety issues? If your buyer’s mortgage valuation is zero, don’t panic. This article explores why nil valuations are sometimes given and what you can do to solve it.
First, be assured that a zero valuation doesn’t mean your property is worthless. Far from it.
Nil valuations are usually given because a property doesn’t meet the mortgage lender’s lending criteria at that particular time. The lender needs to know their funds are safe. So, when a survey indicates that your property has some issues that could mean their loan to your buyer is at risk, that’s when you may receive a nil valuation.
Reasons for nil valuations range from Spray Foam in the loft, Japanese knotweed, dangerous cladding and many other reasons. Most issues can be remedied. Admittedly, Japanese knotweed can take time to get rid of and spray foam is costly to remove but once it’s done your property will be far easier to sell.
Perhaps your home is in a building with safety issues, such as unsafe cladding. The situation is similar. Because once any remedial works are done, your property should then return to the typical market value for your area.
Japanese Knotweed
Valuation variances
Most valuations are carried out for mortgage purposes. But whatever the purpose of the loan – for instance, increasing your ownership in a shared property – mortgage lenders tend to have differing lending and risk requirements in their policies. Some may have defective cladding as a high-risk item. Others may be more concerned about Spray foam or Japanese knotweed. Valuations can vastly differ for each mortgage lender depending on their lending criteria.
In many cases, a discounted value based on the estimated cost of the remedial works can be applied. But that figure isn’t always easy to determine. A discount to the remediated value could be anything from £10k up to a couple of hundred thousand pounds, depending on the issue. However, most RICS governed firms will review a valuation and be prepared to alter their opinion if there’s evidence to justify it.
Valuations can get harder to do in rapidly changing environments. For instance, when a freeholder doesn’t know when remedial works to unsafe cladding will be done. If your landlord doesn’t know, then how can you or the valuer?
What if your home is on a Shared Ownership or Help to Buy scheme?
Again, this can cause another variable in a valuation, especially if you live in a building with dangerous cladding as some shared ownership schemes are.
At least now, thanks to Homes England’s recent update to their Help to Buy scheme, you no longer have the problem of being stuck in a home that you can’t sell for less than the ‘unaffected’ value. We talked about that here.
How EWS1 forms can help
One of the issues in providing an accurate valuation is how much any remedial work to the exterior cladding will cost. To help, the Government brought in the EWS1 (External Wall System) form, which is currently valid for five years. This relatively new process is meant to help you if you’re struggling to sell your home that’s in a building with dangerous cladding.
The form’s purpose is to certify that the building’s cladding has been assessed by a suitably qualified assessor for fire safety regulations. It states what needs doing or if the issue has already been rectified. The form should then provide assurance to lenders, valuers, residents, buyers and sellers that a realistic valuation can be provided because remedial works either have been or are due to be carried out.
It’s the building’s owner who has to apply for the EWS1 form, so if your building is yet to receive one and it is needed you may need to nag your landlord.
There are currently some uncertainties over the EWS1 forms to do with the speed at which they are produced, what needs doing and who’s paying. Often, remedial works are paid for by the Building Safety Fund, which should mean no charge to you if you’re in a housing association home. But a remediation discount may need to be applied if remedial work is in progress.
What else can you do?
· You could ask the valuation firm to review their nil valuation, but you would need to have evidence to support this request. For instance, proof of remedial works, like a bill or estimate, may help them to change their opinion. Or other recent improvements to the building, like a new private car park. It could be that you’ve just heard of a very recent property sale that’s not yet listed on the Land Registry. Any of these could help a surveyor to change their valuation.
· If your home is under a housing association, ask if any remedial works are in the pipeline, which could also help.
· If your buyer were to approach another mortgage lender with a different lending criterion, you may well receive a different valuation.
We constantly check for regulation changes
With regulations often changing, and because different lenders have differing requirements, most surveyors and valuers keep a strict eye on any issues. As soon as any new recommendations are available, we will help and advise you through the process.
So, don’t panic. A nil valuation doesn’t mean your property is worthless. It just means that until the problems are resolved, the property doesn’t currently provide adequate security to lend on a mortgage without further information or action.
